UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
Commission file number 0-21376
PHOENIX MEDIA GROUP, LTD.
---------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 33-0714007
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
290 EAST VERDUGO, SUITE 207, BURBANK, CALIFORNIA 91502
------------------------------------------------------
(Address of principal executive offices)
(818) 563-3900
(Issuer's telephone number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practical date: September 30, 2001 7,410,649
Transitional Small Business Disclosure Format (check one). Yes ; No X
PART I
Item 1. Financial Statements
INDEPENDENT ACCOUNTANT'S REPORT
Phoenix Media Group, Ltd.
We have reviewed the accompanying balance sheets of Phoenix Media Group,
Ltd. as of September 30, 2001 and June 30, 2001, and the related statements of
operations and cash flows for the three months ended September 30, 2001 and
2000. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statement taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
November 13, 2001
PHOENIX MEDIA GROUP, LTD.
BALANCE SHEETS
(Unaudited)
September 30, June 30,
--------------- --------------
2001 2001
--------------- --------------
ASSETS
Cash $ - $ 3,272
Inventory 32,930 32,930
--------------- --------------
Total Current Assets 32,930 36,202
--------------- --------------
Property and Equipment
Office Equipment 25,054 25,054
Radio Equipment 46,126 46,126
Office Condominium 75,000 75,000
Vehicles 41,586 41,586
--------------- --------------
187,766 187,766
Less Accumulated Depreciation (81,525) (76,026)
--------------- --------------
Net Property and Equipment 106,241 111,740
--------------- --------------
Other Assets
Stockholder Loans 6,523 18,598
--------------- --------------
Total Assets $ 145,694 $ 166,540
=============== ==============
PHOENIX MEDIA GROUP, LTD.
BALANCE SHEETS
(Continued)
(Unaudited)
September 30, June 30,
--------------- --------------
2001 2001
--------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 19,808 $ 28,184
Accrued expenses 11,963 11,475
Stockholder loans 70,912 70,912
Liability for overdrawn cash 981 -
Current portion of long-term debt 4,183 4,633
--------------- --------------
Total Current Liabilities 107,847 115,204
--------------- --------------
Long-term Debt 57,809 58,164
- --------------
--------------- --------------
Stockholders' equity
Series A convertible preferred stock
(par value $.01), 5,000,000 shares authorized,
no shares issued or outstanding - -
September 30, 2001, and June 30, 2001
Common Stock (par value $.001),
50,000,000 shares authorized,
7,410,649 shares issued
and outstanding September 30, 2001, and June 30, 2001 7,411 7,411
Common Stock to be Issued 28,000 shares 28 28
Paid in capital in excess of par value 563,266 563,266
Retained deficit (590,667) (577,533)
--------------- --------------
Total Stockholders' Equity (19,962) (6,828)
--------------- --------------
Total Liabilities and Stockholders' Equity $ 145,694 $ 166,540
=============== ==============
See accompanying notes and accountants' report.
PHOENIX MEDIA GROUP, LTD.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months
ended September 30,
---------------------------
2001 2000
------------- -------------
Revenue
Sales $ 29,000 $ 34,000
Cost of sales 6,500 15,923
------------- -------------
Gross Margin 22,500 18,077
Operating Expenses
General and Administrative (31,617) (54,799)
Other Income (Expense)
Interest - net (3,817) (5,651)
------------- -------------
Income (loss) before income taxes (12,934) (42,373)
Income taxes 200 200
------------- -------------
Net Income (Loss) $ (13,134)$ (42,573)
============= =============
Earnings (Loss) Per Share $ - $ (0.01)
============= =============
Weighted Average Shares Outstanding 7,410,649 6,925,649
============= =============
See accompanying notes and accountants' report.
PHOENIX MEDIA GROUP, LTD.
STATEMENTS OF CASH FLOW
(UNAUDITED)
For the three months
ended September 30,
-----------------------------
2001 2000
------------- --------------
Cash Flows From Operating Activities:
Net income (loss) $ (13,134) $ (42,573)
Adjustments to reconcile Net income (loss)
to net cash provided by (used in)
Operating activities:
Amortization and depreciation 5,499 6,383
Change in operating assets and liabilities:
Accounts payable (8,376) 2,600
Accrued expenses 488 73
------------- --------------
Net cash used by operating activities (15,523) (33,517)
------------- --------------
Cash Flows From Investing Activities:
Stockholders loans 12,075 20,480
Purchase of property and equipment - (739)
------------- --------------
Net cash provided by (used in) investing activities 12,075 19,741
------------- --------------
Cash Flows From Financing Activities:
Principle payments on debt (805) (903)
Proceeds from capital stock issued - (10)
------------- --------------
Net cash provided by (used in) financing activities (805) (913)
------------- --------------
Net increase (decrease) in
cash and cash equivalents (4,253) (14,689)
Cash and cash equivalents at beginning of period 3,272 19,815
------------- --------------
Cash and cash equivalents at end of period $ (981) $ 5,126
============= ==============
Supplemental Disclosure of Cash Flow Information:
Interest $ 3,817 $ 5,651
Income taxes 200 200
Supplemental Schedule of Non-Cash Investing and Financing Activities: None
- ---------------------------------------------------------------------
See accompanying notes and accountants' report.
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
This summary of accounting policies of Phoenix Media Group, Ltd. is
presented to assist in understanding the Company's financial statements. The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
The unaudited financial statements as of September 30, 2001 and for the
three months then ended reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to fairly state the
financial position and results of operations for the three months. Operating
results for interim periods are not necessarily indicative of the results which
can be expected for full year.
Organization and Basis of Presentation
The Company was organized under the laws of the State of Utah on
December 5, 1985 as Bullseye Corp. On June 22, 1992 the name of the Company was
changed to Natural Solutions, Ltd. and the corporate domicile was changed to the
State of Nevada. On March 25, 1994, the Company name was changed to Phoenix
Media Group, Ltd. The Company is in the development stage through June 30, 1994.
The June 30, 1995 year is the first year during which it is considered an
operating company.
Nature of Business
The Company was formed for the purpose of creating a vehicle to obtain
capital to seek out, investigate and acquire interests in products and
businesses which may have potential for profit. The Company's objective is to
become a major player in the communications industry with an emphasis on radio,
television and Internet services.
Cash Equivalents
For the purpose of reporting cash flows, the Company considers all
highly liquid debt instruments purchased with maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No.
109, "Accounting for Income Taxes." SFAS No.109 requires recognition of deferred
income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets and liabilities.
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------
Earnings (Loss) Per Share
The reconciliations of the numerators and denominators of the basic and
diluted earnings per share ("EPS") computations are as follows:
For the Three Months Ended September 30, 2001
-------------------------------------------------
Per Share
Income Shares Amount
---------------- -------------- ---------------
EPS (Numerator) (Denominator)
Net Loss to
common shareholders $ (13,134) 7,410,649 $ -
================ ============== ===============
For the Three Months Ended September 30, 2000
-------------------------------------------------
Per Share
Income Shares Amount
---------------- -------------- ---------------
EPS (Numerator) (Denominator)
Net Income to
common shareholders $ (42,573) 6,925,649 $ (0.01)
================ ============== ===============
Depreciation
Office furniture, equipment and leasehold improvements, are stated at
cost. Depreciation and amortization are computed using the straight-line method
over the estimated economic useful lives of the related assets as follows:
Office furniture 5-10 years
Equipment 5- 7 years
Vehicles 5-10 years
Office Condominium 39 years
Maintenance and repairs are charged to operations; betterments are
capitalized. The cost of property sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the property and related
accumulated depreciation accounts, and any resulting gain or loss is credited or
charged to income.
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(CONTINUED)
NOTE 1 - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made in the 2000 financial
statements to conform with the 2001 presentation.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements. The Company maintains the majority of its cash
balances with one financial institution, in the form of demand deposits.
NOTE 2 - CAPITAL TRANSACTIONS
Preferred Stock
The Board of Directors of the Company has the authority to fix by
resolution for each particular series of preferred stock the number of shares to
be issued; the rate and terms on which cumulative or non-cumulative dividends
shall be paid; conversion features of the preferred stock; redemption rights and
prices, if any; terms of the sinking fund, if any to be provided for the shares;
voting powers of preferred shareholders; and any other special rights,
qualifications, limitations, or restrictions.
NOTE 3 - INCOME TAXES
Deferred taxes result from temporary differences in the recognition of
income and expenses for income tax reporting and financial statement reporting
purposes. Deferred benefits of $200,000 and $155,000 for the three months ended
September 30, 2001 and 2000 respectively, are the result of net operating
losses.
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(CONTINUED)
NOTE 3 - INCOME TAXES (continued):
The Company has recorded net deferred income taxes in the accompanying
balance sheets as follows:
As at September 30,
-------------------------------
2001 2000
--------------- --------------
Future deductible temporary differences related to
Reserves, accruals, and net operating losses $ 200,000 $ 155,000
Valuation allowance (200,000) (155,000)
--------------- --------------
Net Deferred Income Tax $ - $ -
=============== ==============
As of September 30, 2001, the Company had a net operating loss ("NOL")
carry forward for income tax reporting purposes of approximately $588,000
available to offset future taxable income. This net operating loss carry forward
expires at various dates between June 30, 2001 and 2021. A loss generated in a
particular year will expire for federal tax purposes if not utilized within 20
years. Additionally, the Internal Revenue Code contains provisions which could
reduce or limit the availability and utilization of these NOLs if certain
ownership changes have taken place or will take place. In accordance with SFAS
No. 109, a valuation allowance is provided when it is more likely than not that
all or some portion of the deferred tax asset will not be realized. Due to the
uncertainty with respect to the ultimate realization of the NOLs, the Company
established a valuation allowance for the entire net deferred income tax asset
of $200,000 as of September 30, 2001. Also consistent with SFAS No. 109, an
allocation of the income (provision) benefit has been made to the loss from
continuing operations.
The difference between the effective income tax rate and the federal
statutory income tax rate on the loss from continuing operations are presented
below:
As at September 30,
-------------------------------
2001 2000
--------------- --------------
Expense (Benefit) at the federal statutory rate of 34% $ (4,000) $ (14,000)
Nondeductible expenses - -
--------------- --------------
Utilization of net operating loss carryforward $ 4,000 $ 14,000
--------------- --------------
$ - $ -
=============== ==============
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company has loaned an officer/director $20,100, interest at 1%,
repayable at $201 per month for ten months with a balloon payment due in 2007.
In addition an officer/director advanced $8,000 at 0% interest, to the Company.
During 2001, an officer/director advanced the Company
PHOENIX MEDIA GROUP, LTD.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(CONTINUED)
NOTE 4 - RELATED PARTY TRANSACTIONS (continued):
$62,912 at 0% interest.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
September 30, June 30,
-------------- ---------------
2001 2001
-------------- ---------------
Mortgage payable with interest at 8.75%,
payable monthly $393.36, due March 22,
2003, collateralized by deed of trust $ 47,572 $ 47,709
Note Payable with interest at 4.90%,
payable monthly $398.81, due July 15, 2004 14,420 15,088
-------------- ---------------
Less Current Maturities (4,183) (4,633)
-------------- ---------------
Net Long-term Debt $ 57,809 $ 58,164
============== ===============
Annual principal payments on long-term debt are as follows:
October 1, 2001 - June 30, 2002 $ 3,131
Year Ended June 30, 2003 4,220
Year Ended June 30, 2004 4,276
Year Ended June 30, 2005 738
Year Ended June 30, 2006 805
thereafter 44,639
--------------
Total $ 57,809
==============
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE
When used in this Form 10-QSB, the words anticipated, estimate, expect, and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks, uncertainties and assumptions including
the possibility that the Company's will fail to generate projected revenues.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected.
General
The following discusses the financial position and results of operations
of the Company.
Significantly all of the Company's revenues came from its resale of air
time to its customers. That was the Company's principle service provided during
fiscal 2001. Revenues from sales of items associated with Manfred Moose(TM) were
negligible. At the present time, approximately twelve percent of customers with
six month contracts renew their contracts while approximately twenty percent of
customers with three month contracts renew their contracts. Although the Company
provides service to its customers with repeat business, there is no assurance
that such customers will maintain or increase the level of volume of business of
the Company.
The Company produces a weekly radio talk show which it produces in its
Burbank offices. The Company purchases air time from four radio stations and
resells the air time to customers seeking to advertise their goods and services
during the program. The Company has been producing its radio show for over two
years. The companies which sponsor the talk show through their purchase of air
time can play their own previously produced commercials or have the Company
provide the commercial for broadcast during the show.
Results of Operations - The following table set forth, for the three months
ended September 30, 2001 and 2000, certain items from the Company's Condensed
Statements of Operations expressed as a percentage of net sales.
3 months 3 months
ended ended
09/30/01 09/30/00
----------- ----------
Sales, Net 100.0% 100.0%
Cost of Sales 22.4% 46.8%
Gross Margin 77.6% 53.2%
Operating Expenses 109.0% 161.2%
Operating Income (Loss) 31.4% 108.0%
Other Income (Expense), Net 13.2% 16.6%
Income (Loss) Before Income Taxes 44.6% 124.6%
Income Taxes 0.7% 0.5%
Net Income (Loss) 45.3% 125.1%
Net Sales
Net sales for the three months ended September 30, 2001 compared to the
three months ended September 30, 2000 decreased by approximately $5,000 or
14.7%. This decrease was due to what management believes to be a temporary
downturn in the company's business.
Cost of Sales
Cost of sales for the three months ended September 30, 2001 decreased
approximately $9,000 or 56.5% compared to the three months ended September 30,
2000. As a percentage of sales, cost of sales decreased 52.1% from 46.8% to
22.4%. This decrease was due to a decrease in operations.
Also, as the Company completes development of the various Manfred
Moose(TM) projects it is currently working on, its cost of sales will be
affected, although the Company cannot predict with any degree of accuracy how
much since, to a large extent, that depends on how successful this new line of
business in for the Company.
Operating Expenses
Operating expenses during the three months ended September 30, 2001
decreased approximately $23,000 or 41.9% compared to the three months ended
September 30, 2000, from approximately $55,000 to $32,000. As a percentage of
sales, operating expenses decreased 33.4% from 161.2% to 109.0%. This decrease
was due to the decrease in operations.
Liquidity and Capital Resources
The Company requires working capital to fund its current operations. The
Company has budgeted its anticipated revenue and cash flows, after paying
expenses, from its sale of radio air time to provide for its anticipated
expenditures to fund development of the Manfred Moose(TM) project until such
time as the Company begins to receive revenue from Manfred Moose(TM) projects.
If the Company's revenues decline below present or projected levels, the Company
may have to scale back its operations and its proposed development of Manfred
Moose(TM) to accommodate the resulting shortfall in revenues to fund its
projects. During the three months ended September 30, 2001, the Company's
revenues decreased approximately $5,000 over revenues from the three months
ended September 30, 2000. It is anticipated that the current operations will
expand and the funds generated will exceed the Company's working capital
requirements for the next year.
The Company has long term goals to further develop Manfred Moose(TM)
merchandise and products over the next twelve month period and expects that the
projects it currently has in development will require approximately $150,000
over the next twelve months. The Company believes that its operations will be
able to provide the funds for these development costs over the next twelve
months. The Company anticipates that ultimately, these development costs will be
recouped through the eventual sales of the various products being developed. If
revenues are not sufficient to fund its operations, the Company will need to
seek alternative sources of financing
either through loans or through raising capital. There are no formal commitments
from banks or other lending sources for lines of credit or similar short-term
borrowing. There can be no assurances that the Company will be able to obtain
alternative financing through loans or capital and the Company has no
commitments for either type of financing. If alternative financing is not
available, then the Company will be forced to scale back its proposed operations
and perhaps be forced to abandon its Manfred Moose(TM) projects or delay it
significantly. The Company's lack of current assets would be a factor to be
considered by potential lenders or investors in deciding whether or not to loan
money to or invest in the Company.
The Company generates and uses cash flows through three activities:
operating, investing, and financing. During the three months ended September 30,
2001, operating activities used cash of approximately $16,000 as compared to
approximately $34,000 for the three months ended September 30, 2000. Much of
this decrease is attributable to the Company's decrease in operations.
During the three months ended September 30, 2001, investing activities
provided approximately $12,000 primarily due to proceeds from stockholder loans
of approximately $12,000. During the three months ended September 30, 2000,
investing activities provided approximately $20,000 primarily due to the
proceeds from stockholder loans of approximately $20,000.
Financing activities used approximately $800 during the three months
ended September 30, 2001, primarily from principle payments on debt. During the
three months ended September 30, 2000, financing activities used approximately
$900 for principal payments on debt.
Management believes that the Company's current cash and funds available
will be sufficient to meet capital requirements and short term and long term
working capital needs in the fiscal year ending June 30, 2002 and beyond, unless
a significant acquisition or expansion is undertaken. The Company is constantly
searching for potential acquisitions and/or expansion opportunities. However,
there are no arrangements or ongoing negotiations for any acquisition or
expansion.
RECENT DEVELOPMENTS
The Company continues to pursue its efforts in marketing and licensing
Manfred Moose(TM) and is working to complete the projects with Air Tahiti
described above. Efforts to work on a cartoon series are still progressing. The
Company entered into an agreement with a major shareholder whereby that
shareholder invested $50,000 in during the three months ended March 31, 2000 to
help fund the development costs incurred by the Company in creating and
marketing Manfred Moose(TM).
Inflation and Regulation
The Company's operations have not been, and in the near term are not
expected to be, materially affected by inflation or changing prices. The Company
encounters competition from a variety of Companies in its markets. Many of these
companies have long standing customer relationships and are well-staffed and
well financed. The Company believes that competition in the its industries is
based on customer satisfaction and production of quality products and services,
although the ability, reputation and support of management is also significant.
The Company does
not believe that any recently enacted or presently pending proposed legislation
will have a material adverse effect on its results of operations.
Factors That May Affect Future Results
Management's Discussion and Analysis and other parts of this filing
contain information based on management's beliefs and forward-looking statements
that involve a number of risks, uncertainties, and assumptions. There can be no
assurance that actual results will not differ materially for the forward-looking
statements as a result of various factors, including but not limited to the
following:
The markets for many of the Company's offerings are characterized by
rapidly changing technology, evolving industry standards, and frequent new
product introductions. The Company's operating results will depend to a
significant extent on its ability to design, develop, or otherwise obtain and
introduce new products, services, systems, and solutions and to reduce the costs
of these offerings. The success of these and other new offerings is dependent on
many factors, including proper identification of customer needs, cost, timely
completion and introduction, differentiation from offerings of the Company's
competitors, and market acceptance. The ability to successfully introduce new
products and services could have an impact on future results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not engaged in any legal proceedings other than the
ordinary routine litigation incidental to its business operations, which the
Company does not believe, in the aggregate, will have a material adverse effect
on the Company, or its operations.
No Director, Officer or affiliate of the Company, and no owner of record
or beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such Director, Officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
pending litigation.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Phoenix Media Group, Ltd.
DATE: November 14, 2001
By: /s/ RONALD R. IRWIN
----------------------------------------------------
Ronald R. Irwin, President
(Principal Executive and
Accounting Officer)